Investment trust slashed its China exposure.

Scottish Mortgage Investment Trust, one of the biggest China bulls in recent years, has slashed its exposure there, including investments in Alibaba and Tencent.

James Anderson, former co-manager, said China was an even more compelling source of tech opportunities than Silicon Valley. Around a third of its portfolio is in private companies, which it says has marked down by an average of 17.8 per cent in the six months to September 30. The new co-manager Tom Slater warned in May that the war in Ukraine was a factor that had caused a deterioration in US-China relations and that foreign investors needed to be mindful of limits Beijing might impose on investment gains. Still, he also said the trust’s China holdings remained «largely unchanged» this year. For example, Baillie Gifford invested in Alibaba in 2012, when the company was still private.

It was the £228bn Edinburgh-based asset manager’s first investment in an unlisted company. It also bought stakes in Chinese food delivery app Meituan and TikTok owner ByteDance when they were still private companies. As of September 30, Alibaba accounted for 0.9 per cent of the portfolio, down from 2.5 per cent on March 31, and Tencent for 2.8 per cent, down from 4.2 per cent. It currently has a 3.4 per cent holding in Meituan and a 2.5 per cent stake in ByteDance.

Peter Singlehurst, head of private companies at Baillie Gifford, told the Financial Times Future of Asset Management event in London this week that the firm is «not ready to walk away from China at all» and would continue to seek out «those handfuls of exceptional companies» in the country.

«If the next generation of companies were to start raising capital in renminbi, that would make it much more difficult for foreign investors to access the best companies,» Singlehurst said.

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